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Different types of ownership of business ranging from the simple to the complex. Here I will cover the main types, outlining the advantages and disadvantages of each leading to a decision on which type of ownership is most appropriate for my business.

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Introduction

Types of ownership There are many different types of ownership of business ranging from the simple to the complex. Here I will cover the main types, outlining the advantages and disadvantages of each leading to a decision on which type of ownership is most appropriate for my business. Sole Proprietors A sole proprietor, or sole trader, is the name given to someone who runs the business by themselves. This is usually someone who is particularly skilled in one area or had a very good and marketable idea. There are many advantages and disadvantages to setting up a sole proprietorship. Advantages Sole proprietorships often require less capital to start up than the bigger businesses. This is because they are usually smaller and have less staff to start with. This cost is minimal and often only a few hundred pounds. Sole proprietorships are easy to set up, few forms and licenses need to be obtained and the business can start almost straight away, resulting in less time being unemployed. The only official form you need to fill in is a inland revenue form for use when calculating income tax, it also entitles you to many tax advantages outlined later. ...read more.

Middle

Profits are split amongst the partners in order of who put the most money into the partnership e.g. someone who paid 60% of the starting capital would receive somewhere approaching 60% of the profits. This process is not necessary and can create fractures between partners. Partnerships don't have to employ accountants or lawyers to help run the business although they often do to save time. These advantages are pretty similar to those that can be taken advantage of in a sole proprietorship. However there are some advantages only a partnership can receive. It is usually easier for two people to raise starting capital than it is for one person on their own. This is extremely advantageous at the start up of the business. Partners often offer a range of skills to each other, which are quintessential to the running of the business. For example one man might be a trained engineer or technician whilst the other might be an excellent salesman. In these cases they rely on each other's skills to run the business. Partnerships can have sleeping partners. Partners who invest capital into a business but don't wish to take any part in the running of it. ...read more.

Conclusion

This means that investors and owners only stand to lose what they invest into the company, not the personal possessions etc. For example if a company ran up large amounts of debt then the owners would not be obliged to pay off any of that personally. This is a big bonus to the company as it is much easier to attract potential investors who are not willing to risk unlimited liability. These are the main advantages of becoming a limited company, and while they don't seem much they are actually a huge bonus. Disadvantages A limited company has to display information to the public at the end of every fiscal year. Some companies may not want so much information released. It can also be fairly expensive, costing a minimum of �700 a year to prepare a report. Complying with the rules of the London stock exchange is also a big disadvantage to any limited company and very costly. However companies can list themselves in the alternative investment market (AIM). This is quite a lot cheaper but is seen as more risky by prospective employers. This can make it quite hard for a business to attract new shareholders. Suitability Overall I think this is the most suitable choice for my business. This way I am likely to attract more investors plus I would not have to suffer from unlimited liability. ...read more.

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